In this commentary, I will examine Globe International Limited's (ASX:GLB) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the luxury industry performed. As an investor, I find it beneficial to assess GLB’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Was GLB's recent earnings decline indicative of a tough track record?
GLB's trailing twelve-month earnings (from 30 June 2019) of AU$8.2m has declined by -2.9% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 53%, indicating the rate at which GLB is growing has slowed down. What could be happening here? Well, let’s take a look at what’s going on with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Globe International has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 11% exceeds the AU Luxury industry of 5.5%, indicating Globe International has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Globe International’s debt level, has declined over the past 3 years from 18% to 18%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. You should continue to research Globe International to get a better picture of the stock by looking at:
- Financial Health: Are GLB’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Valuation: What is GLB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GLB is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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